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Alexion: The News is Very Good But Not Completely Good

By, Mitchell Young

NEW HAVEN: When a company reports organic revenue growth of 18.6% year over year, hats typically get tipped to the company, all over Wall Street. New Haven’s Alexion Pharmaceuticals [ NASDAQ: ALXN] did just that and more, its fourth quarter income was up substantially, from $67 million to $93 million. That’s real money, in anyone’s book, but there remain Alexion doubters still.

Only a couple of months back the company parted ways with its CEO David Hallal and CFO Vikhas Sinha and installed an interim CEO, David Brennan a board member and former CEO of Astra Zeneca.

The moves came in response to claims by a former employee about how sales were being booked. The company held back on its 3rd quarter 10Q filings and started its own "internal investigation," the news unleashed a couple of class action lawsuits as the stock hit a yearly low of $113 soon after the disclosures.

In early January however, Alexion filed the 10Q and said that there was no need for any restatement of income or sales. Case closed, one would hope but the the class action lawsuits and other questions cloud Alexions's future..

The stock however, has rebounded, opening at just under $138 a share the day of the earnings announcement before dropping back later, to $132 as we report, still higher, than when the bad news broke in November

Seems pretty rosy, but behind the numbers a couple of big questions still linger. The sales growth has come mostly from the company’s flagship product Soliris. Efforts to extend Soliris to other conditions hit a roadblock with a failed clinical trial in the fourth quarter..

Soliris drug treats a rare disease and at $440,000 per year it is about the most expensive drug on the world market, althugh another drug from Alexion is assuming that mantle. In addition as we reported in January, several companies are knocking on the door with competing products to Soliris, that could arrive in the next few years.

In 2015 Alexion under then CEO and Founder Leonard Bell set out to diversify its drug pipeline with the $8.4 billion acquisition of Synageva of Lexington, Mass. The acquisition and an earlier one for $610 million in 2012 of Enobia of Montreal Canada had been projected to bring in as much as $1.7 billion in new sales. Much of that growth is expected to come from Synageva’s drug Kanuma. Drugs from both companies received FDA approvals at the end of 2015. So far sales have created some skeptics on the Synageva acquisition, as sales of Kanuma for 2016 were reported at only $29 million with $11 million coming in the fourth quarter.

Sales from Enobia’s drug Strensiq however showed a hefty increase from $11to $71 million in the fourth quarter. Strensig treats a very rare inherited bone disorder. British National Institute for Health and Care Excellence (NICE) initially denied the purchase of the drug, due to it price, reportedly costing potentially $2 milion per year per patient. The regulator relented because of the drugs potential to signfiicantly aid a small number of babies and children.

Alexion is forecasting a sales increase to $3.5 billion for2017 and said it was buying back up to $1 billion of its shares.